Zombie Recovery: CA Jobless Rate Jumps

JULY 22, 2011

By JOHN SEILER

California is suffering what I call a “Zombie Recovery.” The state economy is walking, but dead.

Today the U.S. Bureau of Labor Statistics released new numbers for June 2011 showing that California’s unemployment rose to 11.8 percent from 11.7 percent in May. That reversed slight declines in unemployment in recent months. That means the state is staggering, brainless, through the night of the American economic nightmare.

California’s unemployment rate remained the second worst in the nation, after Nevada’s 12.4 percent.

California’s unemployment increase of 0.1 percentage point mirrored the national increase of the same amount in June, in that case to 9.2 percent. The “green shoots” of economic recovery that Vice President Biden once said he saw growing have been trampled underfoot, especially by the Zombie Army march of California’s economy.

North Dakota Leads the Way

The BLS numbers also showed the contrast heavily taxed and regulated California with North Dakota, whose 3.2 percent unemployment rate is the lowest in the nation. The sweltering summers and frigid winters haven’t stopped businesses from moving to the Peace and Garden State to enjoy its pro-business climate.

According to the ALEC-Laffer “Rich States, Poor States” survey released in May, North Dakota ranked fourth of the 50 states in Economic Performance, with a reasonable tax and regulatory climate. By contrast, California ranked a dismal 46th in Economic Performance due to its punitive tax and regulatory climate.

Of course, some areas of California are booming. On June 19, Apple released a report showing its earnings surpassed analysts’ expectations for the ninth straight quarter. Its popular iPad has propelled sales to record levels.

Google, Intel, Facebook, Twitter and other high-tech companies are growing fast as well. But those companies provide only a small portion of the state’s gargantuan work force.

And even in Silicon Valley, not all is well. Just last month, Apple located a vast, $1 billion server farm in North Carolina after that state improved its tax structure. “North Carolina continues to be a prime location for growing and expanding global technology companies,” said Governor Beverly Perdue. “We welcome Apple to North Carolina and look forward to working with the company as it begins providing a significant economic boost to local communities and the state.”

That boost will not be coming to California.

And just last Monday, Cisco Systems announced it was laying off 11,500 workers. The company makes routers and switches for the Internet. Back in April, Cisco also axed the Flip camera, shedding another 550 jobs.

Meanwhile, California keeps assaulting jobs creators. Back in April, Gov. Jerry Brown signed a law mandating that 33 percent of California electricity must come from “renewable” sources. Critics said it could double the cost of electricity.

AB 32’s expensive Cap and Trade scheme was delayed last month to get beyond next year’s election. But it still looms as another assault on businesses and jobs.

And although Brown signed into law a budget that didn’t include tax increases, he, the Democratic Legislature and their government-union controllers remain obsessed with heaping even higher what already is one of the highest tax burdens in the nation. The uncertainty on future taxes is a big negative for businesses.

Business Exodus Continues

Meanwhile, back in the real world, Relocation Coach Joseph Vranich keeps reporting record departures of California businesses for other states. Here’s just one of them:

Calif. Co. Disinvestment Event #110  

Fisher Investments 

Out-of-State Location: Camas, Washington

California Community HQ: Woodside

California County: San Mateo

Information: Fisher Investments is building a 120-acre campus in a community near the Columbia River. CEO Ken Fisher has said earlier that that “he’s looking to move his corporate headquarters into a friendlier business climate than Woodside, Calif., where the company is currently based.”

Source: OregonLive.com June 7, 2011 story, “Ken Fisher: Clark County should bang on corporate doors in California, focus on ‘knowledge workers’.”

More Information: The Columbian said that “The $30 million campus could become Fisher’s new corporate headquarters” and that it’s a “$43 billion advisory asset management firm.”

Washington has no state income tax. California’s top income tax rate is 10.3 percent, but it could go much higher if Brown and the Democratic Legislature have their way.

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  1. LetThemEatCake
    LetThemEatCake 22 July, 2011, 09:42

    All the fools who thought American Labor was too expensive & cheaper 3rd world goods were a good idea, were either: 1) shortsighted idiots, or 2) the greedy & self-centered – who personally benefited from the international expansion of multi-national corporations.

    For most people – American Jobs are like a huge domino set, as they fall – they begin to effect others.

    What’s good for the average American family – is ultimately good for all of us.

    Reply this comment
  2. LetThemEatCake
    LetThemEatCake 22 July, 2011, 10:47

    John,

    fyi – don’t know if you saw this on Amazon’s “California Sales Tax Dodge” …

    http://www.sacbee.com/2011/07/21/3784339/amazons-shameful-california-tax.html

    Agree or not on this one – thanks for your efforts.

    Reply this comment
  3. Bruce Ross
    Bruce Ross 22 July, 2011, 11:16

    “The sweltering summers and frigid winters haven’t stopped businesses from moving to the Peace and Garden State to enjoy its pro-business climate.”

    Do you know much about North Dakota? It’s in the midst of an oil boom — with money all but literally being pumped out of the ground like water. Plus, farm commodity prices are great.

    Plus, it’s not the kind of place you stay for the natural beauty if you don’t have a job.

    Reply this comment
  4. Kronick-HCA
    Kronick-HCA 22 July, 2011, 11:38

    First, the maximum California state income tax rate is 9.3%, not the 10.3% you quoted. Second the impact of public agency (government) funding cuts since March have cut jobs and the purchase of goods and services across the state. The private sector which produce those goods and services for both public agencies and their layed-off workers has had to contract as well.
    The public sector either expands economic activity if it is funded or contracts economic activity when funding is cut. State public sector funding has been cut by 6% since 2000 despite an increase in population of 15% and a cummulative inflation impact of 35%.
    Anti-government ideologs like your organization will never acknowledge the importance government spending has on the state residents’ happines, health, education, and well-being.

    Reply this comment
  5. Ron Kilmartin
    Ron Kilmartin 22 July, 2011, 12:17

    You think this is bad? Wait til Mary Nichols gets CARB cranked up for a full blown AB32 attack on the economy.

    Reply this comment
  6. CalWatchdog
    CalWatchdog Author 22 July, 2011, 15:50

    Mr. Kronick-HCA: You’re forgetting the 1 percentage-point millionaires’ tax, from Prop. 63, which raises the top rate to 10.3 percent.

    — John Seiler

    Reply this comment
  7. Barb
    Barb 23 July, 2011, 08:09

    Thank you for clarifying the tax code. I also looked up the tax structure and much to my chagrin discovered an additional 1% with incomes over $1,000,000 for Mental Health Services passed via Prop.63. Having lived in the state for a short time, I am shocked to see such a tax. But perhaps, I shouldn’t be!

    Reply this comment
  8. David from Oceanside
    David from Oceanside 23 July, 2011, 17:34

    Kronick-HCA has in his comments made the same mistake all Keynesian’s make in their discredited theory. While pointing at the seen, they miss the unseen.

    In Bastiat’s broken window parable, a window is broken by accident. When the owner of the window spends money to fix the window, the glazier takes his wages and buys bread and the baker uses that money to buy shoes and thus the economy is enriched. This is the seen.

    However should the window owner not have had to fix the window he may have used that money to buy bread, shoes or maybe saved the money. The saved money may have been loaned out for a new equipment at the shoe manufacturer. We will never know because the money was spent fixing the window.

    The difference in the first and second instance is the cost to fix the window. had the window never broken there would be the window and the cost to fix the window, thus greater wealth.

    Government is that broken window. It creates no wealth, only consumes wealth. The money it does not have to spend is money left in the accounts of the taxpayer, where it may be invested or spent.

    Believing that government spending creates wealth is an Ester bunny. You can hope government spending creates wealth but in reality it creates only debt,and a diminished standard of living in the aggregate.

    If this were not so, the massive federal spending of TARP and the Stimulus package would have worked and this Zombie recovery would have reduced unemployment to acceptable levels.

    Reply this comment

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